Big Pharma Capex Continues to Grow, but Rate Slows

Spending by global bio/pharmaceutical companies on new plant and equipment grew by an average of 2.7% in 2016, compared to sales growth of 4.4% (see Figure 1, below). This is the first year in recent times that revenue growth has outpaced capex growth. Moreover, the increase in capital expenditure represented a significant decline from the average figure of 6% per year from 2010-2015 (see the recent PharmSource Trend Report: Bio/Pharma Capex Trends 2016).

Total spending for the 17 largest companies rose to $19.3 billion. Eight companies increased expenditure, while nine reduced their spending, although the data disclosed significant variation on a company by company basis.

Collectively Bristol-Myers Squibb, Merck, Novo Nordisk and Pfizer recorded an additional $1.4 billion in capex, while the pharmaceutical segments of Novartis and Roche reduced spending by more than $1 billion. However, these figures need to be put into perspective; the two Swiss companies still recorded aggregate spending of about $3.5 billion in 2016.

While the rate of growth may have slowed the scale of capex spending by global bio/pharma companies indicates that most of them continue to favor in-house development and manufacture over outsourcing to CDMOs. The global bio/pharma sector’s outsourcing propensity has declined sharply in the past 10 years as the 25 largest companies have built up internal capacity, especially for biologics and advanced therapies; the share of global bio/pharma NMEs that are contract-manufactured has fallen from nearly 50% 10 years ago to only 20% in 2015/16.

This article is reprinted from the May issue of Bio/Pharmaceutical Outsourcing Report. The full article addresses the continued growth in capex and it’s effect on the global bio/pharma sector. To learn more, click here.

Saul is PharmSource’s Director of Market Intelligence. He brings over 15 years of experience in market analysis, having worked in business intelligence roles at Evaluate Pharma, Cardinal Health (now Catalent) and Abbott Laboratories. Prior to that, he was a Post-doctoral fellow in Neuropharmacology at the Universities of Birmingham and Bristol. Saul holds an MSc (Neuroscience) from the Institute of Psychiatry (King’s College London) and a D.Phil in Neuropharmacology from the University of Oxford.